With the ugly performance of the US stock market since the beginning of October it’s important to remember why we must diversify our retirement portfolios. There’s a world of opportunities in stocks, but only about half of those opportunities are in US companies, so the other half is outside of here in the foreign and emerging markets.

When we diversify (by investing in thousands of big and small companies in the US and abroad) we accomplish two things:

We decrease the likelihood that we’ll have the best or worst performing portfolio. And when it comes to our one shot at planning our retirement, we can’t swing for the fences and come away with either a home run or a strike out.
We reduce and help manage catastrophic losses that can come with investing in one area of the market or investing in just a handful of companies.

For more information, you can check out this article from DFA; I highlighted a couple areas I thought were important to read.